mr. garamendi: the gentleman is absolutely right. i know i see this in my own district and in fact in my own neighborhood and in the families of my staff. we have, on my staff, members of families who have lost their homes, who have had to do the short sale who got into these mortgages that they couldn't possibly pay that had these readjustments. all those things. now what was causing that? it was wall street. wall street was making it happen by creating these collateralized debt obligations by the fancy financial ma nip lailingses, and all that was going on, why were they doing it? to make a big profit -- and they did. now, today, on this floor, on this floor today, we took up the wall street reform act and consumer protection act. .

it's interesting how the republican leader characterized the members of this house, democratic leaders and the senate have made to address the excesses of wall street. this is the most substantial reform in adjustment of the horrendous wall street practices that took this country to the very edge of an exroorled depression. and yet, our republican colleagues -- let me just get this chart because it is so interesting -- mr. ellison: would the gentleman yield while you're getting the chart. mr. speaker, congressman, you would have thought that america didn't lose 2.8 billion homes to foreclosures last year listening to the republicans. you would have thought, lay man

brothers, freddie mac and fannie mae didn't go down the tubes and cause a depressive market. you would have thought that we didn't have 10% unemployment. you would have thought that there was nothing but responsible behavior and all of a sudden, the democratic caucus is just trying to take over the banking system. we were really in a magical world on the house floor. but thank goodness, the house democrats, led by barney frank and many others, were putting the things in place to preserve our economy. mr. garamendi: you said something that caused me to pull up a chart that i wasn't going to use, but the financial meltdown nearly bankrupted the world, not just america, but the entire world economy came very, very close to a total meltdown.

what it meant to mom and pop back home and what it meant to their 401-k's, 15 trillion destroyed in the last 12 months. $15 trillion destroyed in the last 18 months of the bush administration. say whatever they want to say on that side, but that's what happened. what's happened since then, we have put into effect, the american recovery and reinvestment act and we are beginning to see the stock market come back and the wealth return. the fundamental problem still remains in the housing industry. and that, we have to address. once again, all of the legislation dealing with the mortgage markets, all of the effort to try to rebuild the housing industry has been done

by the democratic side. we have had no help from the republicans. just say no is their mantra. the result is, we pushed forward with great difficulty. the problem is the senate over there. but nonetheless we pushed forward with an effort to restore the housing markets with various plans and mortgages. and today, it's time for us to come to what happened today. today, on the floor of the united states congress, the most far-reaching, most important revamp of the financial industry in this nation's history since 1936 took place. and it was a vote on the wall street reform and consumer protection act. in that very important piece of legislation, there are several sections that deal directly with

the housing market, outliing, making illegal the kind of liar loans, the kinds of revamp and mortgages that were theen cyst of the problem. all -- genesis and holding brokers responsible, holding the banking industry accountable for what it does and setting up a consumer protection agency. now, this is something i understand. i was the insurance commissioner in the state of california, elected statewide twice and i dealt a consume earl protection agency. it's absolutely essential. the capital is particular model is driven by profit motives.

but the profit motive dreeve this nation and the world right to the edge. you neat a countervailing power and the consumer protection provision would protect consumers and allow consumers to speak out, to get assistance and get help. didn't exist. only in the insurance marketplace, which was regulated previously by the individual states, but not in the financial or business markets. when the senate acts, which hopefully they will do, we will have a bill going to the president that will be the most important reform in the financial markets in more than 70 years. it has to be done otherwise we will slip back. this is not big government, but wise government. this is the kind of government that we need to set the boundaries. think of it this way. nfl football.

you play that infer minnesota. vikings -- i'm, sorry. packers. we have the packers playing the vikings. imagine that if the sidelines were erased and imagine if the referees were put back in the locker room, what would happen? mr. ellison: you would have a lot of injured players and funny outcome, people wouldn't trust the outcome and maybe teams would stop playing because they would believe that the rules didn't matter anymore and you would give an incentive to the biggest cheap shot artist on the field, the people who are willing to do the dirtiest thing, the clipping, they would prevail. mr. garamendi: i played football for the university of california

and we would never engage in such a thing, but that's the analogy of exactly what happened on wall street. the regulators were absent. they left the playing field. the leverees left the playing field. they put the rule books aside because anything was allude loud. this bill puts tough new regulations in place. regulates this market. and puts in place the refer yees strngthens the securities and exchange commission. mr. ellison: those football players yourself, didn't good referees make for a more competitive game? didn't that allow competition to flourish? you could figure out who the better team was. mr. garamendi: and when we have a financial regulated market

when this bill is signed -- the point i want to make is this and that's why i brought this thing up, where do you stand? where do the department cats stand? we voted information a major overhaul of the mortgage markets to put in place strict rules and regulations. that's where we stand. where do the republicans stand? well, why don't we just quote the republican minority leader, whose name i won't mention, but let's just say he represents the republicans in this house. he's their leader. in an interview with the newspaper in pittsburgh, pennsylvania, he said that this bill was a nuclear weapon to kill an ant. i got the exact quote here and

maybe i should read it and maybe i don't want to misquote him because what he said was so out jage rouse. that's the social security which we ought to come to in a moment. and social security, he said, we ought to raise the social security age to 70 so we can fin ance the afghan war. where is it? he said this is killing an ant with a nuclear weapon, when referring to the wall street reform and consumer protection bill. killing an ant with a nuclear weapon. well, i'm sorry, but it is a clear indication of where the republicans stand. they are scleerl standing with the big banks. and on the senate side, in the last two days, the financial regulation to pay for this was going to be paid for by the big

banks. but the republicans in the senate said no, you can't make the banks pay for the regulation. can't make the nfl football team pay for the referees. you can't do that. you have to make the taxpayers pay for regulating the banks. whose side are you on here? it's perfectly clear, when you look at all of these whose side you're on, when the minority leader, republican leader says the effort to rein in wall street and protect consume is killing an ant with a nuclear weapon, well, i'm sorry, wall street is not an ant. five of the biggest banks control 70% of all of the financial market. these are not ants. these are gigantic ant eaters and we are the ants they are

eating. whose side are you on? the financial meltdown. the biggest downturn since the great depression. eight million jobs lost. it's not an ant. this is my neighbor who lost his job. this is the homeowner who lost their home. and this is the unemployed person that's begging for our help in continuing the unemployment insurance because this economy has not yet turned around. these are very, very serious things. there are a couple of things we ought to get to here and if you could work with me on this, we talked about the health care reform. it's not big government. in fact, the health care reform is exactly the -- very similar to the reform in massachusetts, which was authored by a republican governor, who went around this nation taking great credit for it until it became a

national model. this is really insurance reform. not a takeover of the health care industry. not at all and it's not even close to socialized medicine. the public option is not in the legislation at all. it is a reform of the insurance marketplace and kind of reforms that allows my 23-year-old daughter to stay on my health insurance rather than becoming uninsured and reform that a young baby born with an illness to get insurance, kind of reform for a 50-year-old individual to has lost their job to be able to get into -- to buy an insurance policy at a reasonable rate. it's the kind of reform that ends the discrimination that every single woman in this nation faces when getting to insurance. if you are a woman in america prior to this health care reform, you had a pre-existing

condition that could and probably would keep you from buying a policy, those discriminatory actions by the insurance companies are over as a result of this reform. mr. ellison: you know, as a woman, you would pay more than a man would of comparable age and condition. the fact is there is a stream between all the things we talked about tonight. we started talking about the oil spill and moved to financial reform and now health care. there i a stream connecting them all. one is that the democratic caucus is consistently on the side of the consumer, of the in investigator and small business person and the -- investor and small business person and the other side is on the side of the corporate giant, the huge well

moaned lobbyist and the people who stand to gain from the status quo. this is a consistent stream. you continually ask the question, congressman garamendi, whose side are you on? the question is, the democratic caucus is on the side of the people. party opposite is on the side of the powerful, well-to-do, the large giant, corporate entity. and this is something that americans have got to put their hands around, that there is a party hoist going to be the one to say we are going to restrain wall street and make them play by the rules and enhance the functioning of the marketplace by making sure there are referees on the field and not in the locker room. and this string is a consistency and ties us together as a consistent, coherent theme and a message that the democratic

caucus is on the side of the american people. i yield back. mr. garamendi: thank you for making that clear. you go through these pieces of legislation, the democratic caucus is there. on the other side, they're standing with big oil, big banks and the big health insurance industry. let me make this point, perhaps, more clear. that is the republican minority leader not only said that we ought to take on this issue of wall street reform as though it were some sort of nuclear weapon killing an ant, we he also talked about the health care, and he said that if the republicans become -- control the congress after this election if they win enough seats after this next election, they'll do everything they possibly can to stop the

patients' bill of rights and other health reforms. they are out to repeal the reform. that we -- that americans desperately need so they can get affordable health insurance. they want to kill those reforms. they want to turn back that women's opportunity to get an insurance policy. we don't care if you have a pre-existing condition, you are at the mercy of the health insurance company if they deny you, that's your problem, you shouldn't have gotten sick. if you're the 23-year-old you're going to lose the opportunity to be on your parent's benefits. that's what the republican caucus wants to do, repeal all the effort to protect consumers and to build into this system a method of keeping us healthy. so, ok, whose side are you on? there is a string here. last logic to all of this. one more thing, and i couldn't believe this when i heard this, it just became, i fwess, in the last day or two -- i guess in the last day or two.

social security. now social security is an insurance policy. you and i pay into social security, as members of congress a certain percentage, of our pay-gos for social security and so it is with every other person in america who is working legally. they are paying into social security. the republican leader has said what he wants to do is increase the rir re-tirmente age to 70. from 65 to 70. and use the savings to finance the iraq and afghanistan wars. i'm going to -- excuse -- i'm going, excuse me, wait a minute, that's my insurance policy, that's my mother's insurance policy, that's the insurance policy of the working men and women out there and you want to take it away to finance the afghan war? i don't think so. but that's one more sign a sign post, we're following a path

here. a sign post of where the republicans stand. big business, ending social security, and in fact, their budget put out by the republican study committee, their budget called for the end of medicare, privatization of medicare, medicaid, and social security. that's their policy. if that's what the public wants, those folks will win the election, they're going to come and control this house and they're going to try to do it. i think that would be a serious problem for every american. medicare, social security, privatized? i don't think so. mr. ellison: if the gentleman will yield, i want to say, in my opinion, social security is one of the greatest pieces of legislation this country has ever seen, and so is medicare. these programs are very important because they signal that we really are in this

thing together. and that we're not going to let our seniors descend to the level where they're eating dog food or making choices between medication and a meal. but it's going to require a population to get it, that there are real things at stake here. big things at stake here. and you the question keeps being asked, whose side are you on? why don't you go through some of those. mr. garamendi: let's go through this. whose side are you on? democrats supporting jobs and bills, cash for caulkers and other programs, every single one of them opposed. unemployment insurance. people are losing unemployment insurance because of the republican party. what are they going to do? the economy hasn't come back, they're going to lose their jobs, lose their home, we're going to start another downward spiral. we talked about the health care

effort. not one republican voted for the health care bill. one in this house. one republican voted for the health care bill. wall street. we talked about wall street reform. republicans vote against it. the democrats vote for it. we talk about think -- about the consume brother text agency. the republicans are opposed to it, the democrats support it. we talk about small business reforms which are in this bill and in other bills, republicans consistently vote against small business. the increase of the small business administration. we can go back through the major bills that this house has voted on, the american recovery act, known as the stimulus bill, republicans voted against it. you look at the energy and climate to break our addiction to oil, democrats vote for it, republicans vote against it. you look at the wall street reform and consumer protection act, democrats vote for it, republicans consistently and en

bloc vote against it. you talk about the gulf oil spill, the deep water horizon oil spill, the republicans blame the government and want to apologize rather than the instigator of the problem, b.p. on social security, the republican leader wants to extend the age to 70 in order to get social security. you talk about health care reform, we've discussed that already. the republicans vote against it. they want to repeal it. they get into pow for the this house, they'll repeal the reforms. unemployment and jobs, every single jobs bill they vote against. every effort we have made to put people to work, whether it was in transportation, and that is in the american recovery act, or in the current jobs bills, keeping teachers employed, we want to employ teachers. they talk about the next generation. yes, but you don't educate that next generation, we're in trouble. all of these things add up.

it is, as you say, there's a string, there's a path, there are road signs here. whose side are you on? the republicans have consistently sided with big oil, big health insurance companies, it's time for us to recognize the difference. mr. ellison: i just want to say that i think the gentleman is absolutely right. i want to say this as i think we're coming down to the final moments. mr. gare men tee: we are. mr. ellison: the republicans had their chance and we are still reaping the bitter fruit of what their leadership has brought this country. they had 12 years between 1994 and 2006 in the congress, and then they had six years with a republican president. in that time they did nothing about reforming wall street. they had two houses and the presidency. they didn't do anything about reining in the banks. they didn't do anything about reforming regulation. they did nothing on health

care. now they have the audacity to say we want the wheel back. here we drove the car into a ditch but we want the wheel back. we'd rather drive again. you know what? just can't happen. i yield back to the gentleman. mr. garamendi: final point is this. in the eight years of the george w. bush administration, about a million net jobs were created. in the last eight months to nine months, more jobs have been created than in the entire george w. bush administration. that's a fact. read it any way you want. we're on the right road here. we want to continue that path. mr. ellison, thank you so very much. it's good to know the vikings are your team. -- the packers are your team. mr. ellison: the vikings. i like the packers, but more the vikings. mr. garamendi: remember in a football game you need a referee, but on wall street you

need a referee also. thank you so much. we yield back our time. the speaker pro tempore: under the speaker's announced policy of january 6, 2009, the chair recognizes the gentleman from texas, mr. gohmert, for half the time remaining before middight. mr. fwomeert: -- mr. gohmert: thank you. well, we heard from c.b.o., the congressional budget office, rather interesting, got a nice quote, director elmendorf announced that part of his statement, he said the gloommy long-term picture is not an argument for rejecting additional spending now to bolster the economic recovery.

indeed, he said, quote, enacting cuts in spending or increases in taxes now would probably slow the recovery. if you read the charge for c.b.o., you can -- it's a little bit gray. but when you have an organization that can't seem to get right what the projections are for the costs -- when you can't get the costs right for what is requested, as we saw with the health care bill, as we saw with so many things they projected, they have been hundreds of millions, billions, hundreds of billions of dollars off over time and yet the director is going to come in and tell us that enacting

spending cuts are going -- well, they could jeopardize, possibly slow the recovery. it's been great to hear my colleagues talk about all the jobs that have been created. we know, for example, in the last month 431,000 jobs, new jobs, have been created by this administration. and you really do have to give the administration credit for most of the jobs that were created last month because when we got the numbers of the 431,000 jobs, 411,000 of them were census workers. great news. unfortunately, those jobs are going to be gone just in a matter of a very few months. so there's 411,000 jobs, and it's true, president bush took office after the 2000 census

had been completed, so he didn't get to create 411,000 jobs in one month as this administration has for census workers. unfortunately for him, the economy experienced the most incredible blow at a time coming off the dot com bubble of the late 1990's, the economy was hurting and then 9/11 happened and if it had not been for the tax cuts, we would have been surely in the midst of a great depression, perhaps like the 1930's. so the tax cuts helped stimulate the economy, helped get things going in a good way. the problem is that once the republicans not only had the house and senate like they did from 1995 to 2000, not only did they balance the budget, the president doesn't do that, the congress has to do that. not only did they balance the

budget in the republican congress but they also reformed welfare and for the first time since the beginning of welfare after a welfare reform that the congress did, i think president clinton vetoed it, once they had the votes to override the veto, the second time he went ahead and signed it, now he's quite proud of it. and i saw this on a chart that was presented back in 2005, at harvard of all places, i got the impression many of them were shocked. but when you looked at single women income since welfare came into existence, when adjusted for inflation, their income was flootlined over that 30-year period. after welfare reform, they were

pushed, basically pushed out of the rut, out of the rutted mess that the federal government had created for them and not allowed them out of. the welfare reform pushed them toward reaching their god-given potential and so for the first time since welfare had been created in 1960's, single women income, when adjusted for inflation, started going up. and they continued. but now after republicans got both the white house and the house in congress, they found out it was kind of fun to spend when you had a president who wouldn't veto anything and then you had a president that was sending over requests for more money than conservatives, republicans, were really comfortable with, so they'd compromise and it still would be more than anybody should have spent.

there's a giddyness when the party has the white house, house, and senate, like we've seen the last year and a half. even in the house and senate in 2007 and 2008 we saw great giddyness and just runaway spend like the country had never faced until the last year and a half. . is the president and vice president always include created and saved, because when you say you saved a job, that means it's impossible to ever prove that. and it's impossible to disprove that. like the old story, what is your job? i keep elephants from running in this house.

there aren't any elephants. same kind of deal. they saved probably and can take quote based on the claims being made these days but it's an interesting time and what we have always seen today is the passage of the reform bill. and i know so many of my colleagues across the aisle have good hearts, good minds and the best of intentions, but as we saw with tarp, many people on both sides of the aisle and what we have seen since then, since this president took office when this president says, let's get this bill passed, then they can basically come up with 2,000

pages that only idiots would like me to read. so what they are left with, you get the talking points. so many people, they weren't accurate and come to the floor and with the best of intention, read the talking points and say this will end the massive bailouts, bless their hearts. they don't realize if they would read specific provisions they will find out it does just the opposite. this bill that was passed today creates a systemic risk council. let's tell you how it should be taken care of. goldman sachs gets greedy, runs their cart in a ditch, a.i.g.

gets greedy and sells insurance called credit default swaps and get their cart in a ditch, we have something called bankruptcy. you don't have to liquidate. most of the departments at aferinge sound like they are doing well. just start splitting it up and then it will never be too big to fail again but that's not what happened. we've bailed out goldman sachs to the point that since this administration took action and cut these contracts with goldman sachs they have had their highest profit year in the whole history of the country while the country was hurting. they had record profits and much of it has to be credited to this government.

i'm sure people meant well but that's not the kind of financial bill we need today. that financial reform bill today allows the -- they don't get to pick the winners and losers. washington, of all places is going to get to decide, you are too important to fail. you are too important to fail. you're too important to fail. you are going to pick winers. here's you need to elect. why don't you let the people in the district decide. this is the business we think is too important to fail and it's

insane and the health care bill that was passed, obamacare bill, it had all kinds of stuff in there, it was going to let the government get their two cents in and take over control of so many aspects, not just the health care. i mean they ordered things for restaurants and machines and all kinds of stuff. it wasn't about health care. it was about the g.r.e., government running everything. that's what this financial bill is about. and also, we find out today in our natural resources hearing, salazar and i know this will be a shock to my former freshman classmate, member of congress, bobby jindal, but i'm reading from secretary salazar's testimony today in our hearing

and i got to get word to mr. jindal, governor jindal, he said, and i'm quoting, we were in the gulf coast probably -- been down there 10 times down there in houston since it started. but we made a call from the command center -- i guess that's in houston to secretary gates and to the white house that essentially gave the authorization to the states to move forward with the coast guard within a few days after this incident occurred, so it is for me, frankly, surprising that you do not have the governors of these states moving forward with the deployment of these national

guard troops. oh, that's great. with all the failures of this department of interior, the secretary has the nerve to come in and blame the governors of those states that have tried to play by the rules and say, look, we understand your law that you have from washington. we have to get your permission so, please, how about giving us permission and he comes in today and says i'm frankly surprised they didn't move forward with the national guard troops. give me a break. what kind of gall does it take to come into a committee, oh, gee, i don't know why the governors didn't do more. i have been to houston 10 times. how about getting out there where the rubber meets the road. or even better, when you were sending, when the secretary was

sending two inspectors to offshore rigs to inspect. we find out they -- their only check and balance is we'll send them out in pairs. and we don't know. the director couldn't tell us. you don't get to see what the investigation is here in congress. we'll get back to you after we have done what we have done what we want to do. it is unbelievable what's going on. and then we here, gee, these things that the public is so outraged about, we're probably going to wait until the lame duck session that people may vote people out and just pass it because they won't care. i'm telling you, mr. speaker, that is the wrong thing to do.

it is wrong morally, ethically. it's just wrong. if people get voted out of office because they were talking about doing something, they should not come in here and do it after they have been voted out. and then we have all this indignation from the northeast about some of the things going on in the gulf and then lo and be hold, it turns out that the news here, i didn't notice when it came through, here is an article from february 2, 2010 and the coast guard has been busy not just with the gulf coast. this was february 20, 2010, they developed a plan to allow the safe passage to allow tankers

carrying it from yemen to boston. and quotes the captain and coast guard commantdant allen, he is saying it could include additional screening of the crew, additional inspections of the crew, blah, blah, blah and making sure no stowaways boarded at the port of yemen where terrorists are going and coming so often. that really is the key here and i'm quoting to ensure that we have a security force on board that ship that's checking the ship wlile it's in waters to guarantee no one who is not authorized to get on the ship. the contract used to be with countries that were completely friendly who had never sent a

terrorist here or trained in other areas or yemen or their country to be a place of safety for terrorists that wanted to destroy our country or from an attack on which our ships happened. we had a contract that had liquified natural gas. if we allow the gas to be produced from this country, we have over 100 years worth of north tral gas if it were allowed to be produced. but, no, we're going to risk bringing in a tanker from yemen, not just a tanker, this says the contracts for 20 years to bring tankers with natural gas loaded into boston harbor. think about an explosion on that ship. that's what the article points out. talks about terrorist attacks. we're going to bring in a bomb

from yemen where the terrorists have been located so often and it turns out people on capitol hill are getting calls who raised a question about it and they get a call, look, we are trying to build up yemen and trying to help this country that is supporting our enemies so maybe they will like us better. i have a bill and filed it all three sessions and i'm hoping we will get it to the floor. we will file for a discharge petition to be brought to the floor. very simple. it says any country -- every country is its own sovereign. any country that votes against us can vote in the u.n. will get no financial assistance from us. you don't have to pay people to hate you. they'll hate you for free. why are we pouring billions and billions of dollars hoping they will like us.

they'll not. you don't buy friendlyness. the speaker pro tempore: the gentleman from texas is recognized for the remainder of the time until midnight. mr. gohmert: you can give somebody your sandwich and give somebody your lunch money and hope that they leave i alone but all they do is keep coming back for more sandwiches or more money. you can't buy love and affection because you are looked out as a john, not as a lover. it's tragic. but that's what we're doing, trying to buy love and affection from people who hate us. it doesn't work. so here we have the natural gas contract going on for the next 20 years and we have over 100 years of natural gas that has been found in this country.

there's no massive oil spills that come from that. a wonderful democrat friend across the aisle did some of his growing up in longview texas as a bill to start giving cars, with that incentive out there, get cars on to natural gas. that would be a huge-up because we have so much natural gas in this country, it will eliminate so much of our dependence on foreign oil. so he has a good bill. and yet, the answer, apparently from this administration is, we're going to buy not use our own natural gas, we're going to buy it from yemen and hope they'll like us better and not blow up our ships or be a safe haven from terrorists who want to blow up our country. that's what we are looking at.

it ain't good. rather tragic. . i could not get over the gall of the secretary to come in here and talk about the governors. the message should be out to all the governors in areas affected by the spill in the gulf, the people at british petroleum, they -- they would have been horse whipped in the old days. it sounds like we're getting word of what happened. the safety record of b.p. compared tore oil companies was abysmal. but when we find out they were the best friends this administration had in the oil business and they were the best friends for our senator, democrat senators down the aisle, down the hall here, we find out that their lobbyists

are mostly close friends of this administration and our democratic friends down the hall here, they realize, heck, they should have had their back cover. they were close -- they were supporting the climate, actually the global warming bill, now called climate change bill because it turns out the planet is not warming but that's a whole other subject. but is it so hard to understand why they thought their back was covered? the deepwater horizon rig was sinking in the gulf after the explosion, senator kerry was still getting hold of british petroleum, some of the articles we've found, he was still getting hold of them hope they'll stay onboard with the climate change bill. the administration, of course, would not want to jump on their big oil company friends, their

support in the elections was so helpful, their support for the -- like even the gas hike, gas tax hike, that is being proposed, some of the things nobody else in the industry would support, it would seem, b.p. was their buddy. so it makes sense that the administration wouldn't immediately want to jump on b.p. they're hoping that b.p. wasn't lying to them, that they'll get this thing under control and it'll all be all right and they can come in and push through the global warming bill and get that done, the crap and trade bill that's going to create cree ate as former chairman of the energy and commerce, former chairman dingell, it's not only a tax it's a great big tax, which may have had something to do with him losing his chairmanship. anyway, let's think about what

we're doing because it has dramatic effects across the country. and of course we know we are also telling israel not to -- this administration has been telling israel just lay off, let them build the illegal palestinian settlements, you don't try to defend yourself, get ready to give away more land, put all this pressure, don't defend yourself, even though iran is developing, enough uranium from two bomb, one would be enough to wipe out much of israel but don't defend yourself, put all that pressure on them and that doesn't make sense. why would we do that to our best ally in the middle east, one of the best friends this country could have in the whole world? one of the few, maybe, sometimes the only one that truly stands up with us like 95% of the time in the u.n., more than most anybody else,

and yet we turn our backs on them, tell them not to protect their own country, don't stand for what's going to help israel's stand. why would we do that? then we start seeing things that make it make sense. like this sign that now, down in arizona, turns out, we've got a wilderness area down in arizona that the park police can go in, but not with any mechanized vehicles or mechanical equipment that's mote orized and the border patrol can't that's motorized and the border patrol can't go there the only people who can go through there with impunity are the illegals. that's why this warning sign, active drug and smug human

smuggling area. it's like the city that spends more on a sign to say there's a bump in the road than it would cost to fix the bump. this is the united states. why are we just saying, look, here's a sign. there's active drug and human smuggling in this area. they're coming through mechanized vehicles, all kinds of motorized things, they're violent, because it says, visitors may encounter armed criminals and smuggling vehicles traveling at high rates of speed. that's because only the illegals come come through here using vehicles. we don't let the border patrol in with vehicles. we know law enforcement gets shot. then it starts to make sense. oh, ok. we're just trying to avoid being hypocrites as a nation. we're telling israel not to defend themselves, let people

overrun them to let those rockets fly constantly, don't bother to check the ships that come in. the flo floe till las that come tissue the flotillas that come in to the gaza strip, it'll be fine. we're able to say that without being hypocrites because that's what we're doing. hey, israel, get over it. we're letting ourselves be overrun. we're letting people come in illegally, armed, we let them take over part of the united states and we're not doing anything about it. we're not being hypocritical when i we say, don't protect yourself, israel. we're doing the same thing, see. that will make israel feel better to know that we're not protecting ourselves. we just turned over part of the united states of america to armed criminals, illegally in this country. the truth is, neither one of

those are good ideas. the truth is, israel should defend themselves. they should be able to stop the rockets from coming in to areas that are attacking them. they should be able to stop illegal settlements. they should be able to do all the things that are necessary for a nation to protect and preserve its national integrity. we lost a senator this week, and my time is running short, and so i want to get through as much of this incredible speech as i can, and i want it understood, this is a speech given by senator robert byrd in 1962, after the supreme court decision to eliminate prayer in schools. this is mr. -- this is from the official record. quoting mr. byrd in his speech.

as time will permit, i'm reading senator robert byrd's speech from 1962. and you know, one of the things i love about america is, for the most part, it's a very forgiving country. men who have been part of the ku klux klan, later was repentant, was very sorry for being part of that organization. and changed his ways and was completely embraced by his colleagues. this is mr. byrd, senator byrd's speech. 1962. mr. president, thomas jefferson expressed the will of the american majority in 1776 when he included in the declaration of independence the statement, that quote, all men are endowed by their creator with certain inalienable rights, that among these are life, liberty, and pursuit of happiness.

little did mr. jefferson suspect when he penned that that the supreme court would rule that a nondenominational prayer to the creator if offered by schoolchildren in the public schools of america in class periods is unconstitutional. the june 25 supreme court decision is sufficiently appalling to disturb the god-fearing people of america and make us all reflect upon the extraordinary nature of the times. for what, indeed, can we expect to happen next if this is to be the way things are going following the french revolution, the atheist revolution has hired a chorus girl to enter a church as the goddess of reason and thereby defile the name of the almighty. following the russian revolution, the bolshevik government established a museum dedicated to the promotion of atheist beliefs. i've been in that museum, i was sick to the point of nausea. but back to robert byrd's

speech. the american people were shocked by both moves. so it was in those days. what about today? can it be that we, too, are ready now to embrace the foul conception of atheism? it's hard to believe, but then what are the facts of the matter? are we not in consequence of the supreme court ruling on school room prayer actually limited in teaching our children the value of god and is this not in fact a first step on the road to promoting atheistic belief? as i turn the page of mr. byrd's speech on the senate floor, let me parenthetically note, robert byrd'scrine beliefs were what caused him to -- byrd's christian beliefs were what caused him to denounce his membership of the k.k.k. it went to the heart and soul of the man and that's why he came to the floor in 1962 and gave this speech. continuing on. through the court decision on school prayer, i'm astonished by the empty arguments set

forth by the majority as opposed to the lucid opinion recorded by justice potter stewart, the lone dissenter. justice stewart did not see fit in engaging in debate over matters of ancient history, as he put it. quote, what is relevant is not the history of an established church in 16th century england or 18th century american but in the traditions of our people, reflected in the practices of the institutions of our government. to that, i would say amen. this, indeed, the crux of the issue, the religious traditions of our people. wherever one may go in this great national city he is constantly remind offend the strong spiritual awareness of our forefathers who wrote the federal constitution and built the schools and churches, who hued the forest, fought the savages and created a republic. in no other place in the united states are there so many and

such varied official evidences of deep and abiding faith in god on the part of government as there are here in washington. let us speak briefly on some of the reminders in washington that reaffirm the proposition that our country is founded on religious principles, the continuance of freedom depends on our restoring the same spiritual consciousness to the mainstream of american life today that made possible these monuments and tributes of the past. a visitor entering washington by train sees the words of christ prominently inscribed above the main arch leading into union station. here at the very entrance of the seat of government of the united states are inscribed, the truth shall make you tree, john 8:32. nearby is another inscription, the words the eight psalm of the old testament, thou has put all things under his feet. a third inscription celebrates the spiritual theme.

let all the ends thou aimest at be fhou god's and truest. all three acknowledge the guiding hand of almighty god. on capitol hill throughout the majestic capital city, similar inscriptions testify to the faith of our forefathers. in the capitol, we find prominently displayed the quotation from the book of proverbs 4rk:7. wisdom is the principal thing, therefore get wisdom and with all thy getting get understanding, end quote. visitors to the library of congress may see a quote of the old testament reminding each american of the responsibility to his maker, it reads what does the lord require of thee but to do justice, love her mercy and walk humbly with thy god, mica 6:8. another inscription in the

lawmakers' library preserves the acknowledgment that all nature reflects the order and buethoif creator. the heavens declare the glor of of god, psalm 19:1. thunder estatue of history tennieson's prophetic lines, one god, one law, one element, and one far off divine event to which the whole creation moves. additional proof that american national life is god-centered comes from this library of congress inscription, quote, the light shine eth and the -- in the darkness and the darkness comprehend eth it not. on the east hall of the library of congress an anonymous inscription assures all americans they do not work alone, for a web begun god sends thread. i realize my time is expiring this moment there is much, much

more in this wonderful speech by the now late senator robert byrd and i will not stop in the future sessions here on the floor until i have finished this wonderful speech by robert byrd. for tonight, since i believe in playing by the rules, the rules require me to yield back, i do now yield back the balance of my time. the speaker pro tempore: the gentleman is recognized for a motion to adjourn. mr. gohmert: i move that the house do now adjourn. the speaker pro tempore: the question sthone motion to adjourn. those in favor say aye. those opposed, no. the ayes have it. the motion is agreed. to accordingly, the house >> the u.s. house voted for changes to the financial system. the legislation creates a panel of regulators shared by the

treasury secretary double monitor risks in the financial system. the measure now goes to the senate where they will debate on the measure in mid-july. if they approve the package, it goes to president obama for his signature. if live house coverage always on c-span. up next on c-span, house debate on the financial regulations bill. then the financial crisis inquiry commission questions at aig executives about the role derivatives played in the 2008 financial collapse. and then the congressional budget office director on the long-term outlook of the federal budget. house members today passed the financial industry regulations bill 237-one under 91. it was a compromise worked out in a conference with members of the senate. here is an hour of the debate

leading up to the vote. mr. garrett: thank you, mr. chairman -- mr. speaker, and i thank you, mr. chairman. i rise in opposition to this job killing continuation of a bailout bill. chairman frank said he was astonished in the interpretation that this is a bailout bill. what is even more astonishing is that this is the same chairman who was earlier last session leading the effort in our last bailout bill. and here he is once again leading the effort on this bill for a continuation of bailout. what is even more astonishing than that is here he stands as the author of the bill with a 2,300 pages in front of him holding up and actually reading the bill and he fails to see that this underlying piece of legislation continues to bail out creditors at the expense of u.s. taxpayers. just as we saw with the situation with a.i.g., where the creditors on wall street and the creditors over in china and such

areas as that were bailed out at 100%, we see the same things possibly going forward here in this legislation as well. perhaps that explains to us all why wall street is applauding this bill, because they know that they will continue to see the bailouts that they saw in the past. so it is astonishing to see that we are repeating history. i know the chairman will say, this is not going to happen because there's the opportunity for receivership. but the chairman well knows, as he looks into the bill, that that receivership isn't for a day or two, it's for a year or three or four or five years that we can continue to see american taxpayers putting out their money to bail out these failed risky institutions. you know, it seems that every term that the democrats who wrote this bill chose to endow the same failed regulators who failed to perceive the last crisis with more and more power. at every single turn the democrats chose more government bureaucracy and more government outreach into our economy. and at every turn the democrats

drew up policies that will kill jobs and restrict credit. now, on the one hand this isn't surprising. we've seen this all before, when you think about it, whether it was in the area of cap and trade or in health care proposals, among others we saw before it. on the other hand, it is disappointing that -- mr. bachus: i yield the gentleman an extra minute and a half. the speaker pro tempore: the gentleman is recognized for a minute and a half. mr. garrett: on the other hand it is disappointing when you consider the history of the failed efforts in the area of health care or the failed efforts on the other side in the area of tax -- cap and tax, that they haven't learned by now from their past mistakes. think about it for a moment. think about what we hear when we go back to our districts, that the american people are delivering a strong message to those of us in washington willing to listen. a message saying that they do not want a continuation, mr. chairman, of the failed policies that you brought to the floor in the past with your bailouts of wall street. the american people say that they do not want to be on the hooks for the hundreds of

billions of dollars to bail out institutions on wall street that made bad risks. they want it to end now and they want it ended today. they want less failed government into their lives and into their economy. they don't want institutions that can look at every single transition, -- -- transaction, whether at the a.t.m., that the government can now look down into those transactions, whether it's opening up a credit card county someplace -- account someplace. any transaction whatsoever that you or i make or anyone listening to this speech tonight will be able to make, because bureaucrats, unelected, unaccountable bureaucrats will be able to look into those transactions. they want less failed government overreach into their lives, they want less intrusions into the economy. what you ask them do they want? they simply want more opportunities, opportunities to work and provide for their families and they want those opportunities without pushing our country into%% greater debt.

unfortunately this bill fails on all accounts. the speaker pro tempore: the gentleman's time has expired. the gentleman from massachusetts. mr. frank: i yield to my colleague, mr. peterson, for one minute. the speaker pro tempore: the gentleman is recognized for one minute. mr. peterson: thank you, mr. speaker. i'd like to read into the record a letter mr. frank and i received. as the letter makes clear, we have given the regulators no authority to impose margin requirements on anyone who is not a swap dealer or a major swap participant. while the regulators do have authority over the dealer or m.s.p. side of the transactions, we expect the level of margin required would be minimal. in keeping with the greater capital that such dealers and m.s.p.'s will be required to hold, that margin will be important. however, to ensure that a dealer or a major stock participant will be capable of meeting their obligations to the end users, i

would -- we need to make sure that they have that backing. i would also note that a few if any end users will be major swap participants as we have included positions held for hedging or mitigating commercial risk from being considered as a substantial position under the definition. i would ask chairman frank whether he concurs with my view on the bill. mr. frank: i yield the gentleman 15 more seconds. the gentleman is absolutely right. we do different than others. the end requirements are not on end users, they're only on major swap participants. they're permissive, they're not mandatory and they're going to be done with an appropriate touch. mr. peterson: thank you. i yield back. the speaker pro tempore: the gentleman from alabama. mr. bachus: at this time i yield four minutes to the gentleman from california, a senior member of the committee, mr. royce. the speaker pro tempore: the gentleman is recognized for four minutes. mr. royce: thank you, mr.

speaker. yesterday a small community banker in ohio by the name of sara walz wrote a letter. she wrote about what she believed will be the end of community banking as we know it. and she notes in her words, going forward we will no longer be able to evaluate loan applications based solely on the credit worthiness of the borrower, we will be making regulation compliance decisions instead of credit decisions. and this gets to the heart of the issue with the underlying legislation that we're discussing. despite the fact that every failed financial firm had some type of federal regulator overseeing it, the answer put forward in this bill is to give broad, largely undefined powers

to those regulators and not, by the way, in the interest of safety and soundness. if the objective was safety and soundness the amendment that i put forward to allow the safety and soundness regulator to overrule the consumer financial protection bureau in cases where safety and soundness was at stake, that would have been upheld. no, that's not the goal here. and to get back to the point that sara makes, her observation is that instead of focusing on providing credit and providing the best possible service to the customers in these small towns that need that credit, these institutions will focus instead their efforts on appeasing the % federal government and on appeasing the allies in congress. why should that give us concern? it should worry us because

whether it is striving toward another goal, such as congress' interest in subsidizing housing, and by the way, that's what happened during the housing crisis, or whether it's funneling cash into friendly community activist organizations like acorn, the fact is the closer big government gets to business, the more likely these favors will become the rule instead of the exception. what i don't like about this is the political pull that comes out of it. what i don't like about it is the market discipline being replaced. and i think on a massive scale this bill replaces objectivity with subjectivity. it replaces the market discipline on main street with political pull in washington. and regulators will now decide

which firms will be treated differently and therefore move through the resolution process and which firms should be left to the bankruptcy courts. why would we care about that when terms of these big ferms -- firms having this ability now to have this alternative means of resolution? well, once in the resolution process, the government will have the authority to provide a 100% bailout to which every creditor it favors, while imposing severe losses on other institutions who bought the capacity same bonds. should we be concerned about abuse in this respect? i think so. because this type of bureaucracy -- bureaucratic discretion has led to abuse in the past. we have already seen that abuse in the obama administration's handling of the chrysler bankruptcy last year. secured creditors, typically entitled to first priority payment under the absolute priority rule, ended up receiving less than the union

allies of the administration who held junior creditor claims. the fact that the regulatory reform -- the speaker pro tempore: the gentleman's time has expired. mr. royce: ensures this kind of favoritism in the future. the speaker pro tempore: the gentleman from massachusetts. mr. frank: mr. speaker, i yield one minute to the majority leader. the speaker pro tempore: the gentleman is recognized. mr. hoyer: i thank the chairman for yielding and i congratulate the chairman for the extraordinary work he's done. i thank mr. bachus, too, who i think is one of the really responsible leaders in the minority in terms of issues of substance and where there are differences, there are honest differences. mr. speaker, i come to the floor and when i do i hear the portions of the debate, sometimes not all the debate. i want to make an observation, though, i listened to the

gentleman from new jersey and he remarked on what the people were saying. and i think that frankly his remarks reflected the difference in the perspective between both parties. indeed, that perspective has been reflected in my three decades here, under mr. reagan and others who have served as president. and lastly with mr. bush. mr. obama's immediate predecessor. and that perspective was, if the regulator would simply get out of the way things would be fine. mr. royce indicates that the market will take care of things. the market will discipline itself, he said. phil graham said that with respect to the derivatives. unfortunately i voted for that bill that mr. graham was for, i made a mistake.

the market did not discipline itself. in fact, the market took extraordinarily irresponsible steps. what i hear, i tell my friend from new jersey, the people saying is, don't let the big guys trample on us. don't let the big guys put us at great risk. don't let the big guys make decisions that they take the risk and we take the loss. that's what i hear the people saying. and that's what i think this deal is designed to respond to. this week mr. boehner compared reforming wall street to killing an ant with a nuclear weapon. that may sound colorful, but this is the greatest economic crisis that any of us, and i'm looking around this floor, have

experienced in our lifetimes. and i'm closer to experiencing the last one than any of you on the floor. but none of us, even at my stage, were alive during the great depression. so this is the first time that we have experienced such a deep, deep recession. but i will tell you, the eight million americans whose jobs it took away, i think it was -- think -- away think it was a mighty big ant that squashed them and their families or the millions more who saw their savings devastated or the families in every one of our districts who lost their homes. they think to themselves, mr. boehner, that was a mighty big ant that came my way. and not more than half of the nation's working adults who

report that they have been pushed by the recession into, and i quote, unemployment, pay cuts, reduced hours at work or part time jobs, closed quote, according to a research center survey reported in today's washington "post." -- "washington post." some of you may think it was an ant that walked through here, but some of you think it was a pretty big elephant that squashed them and hurt them. i don't mean an elephant in the symbol of your party, respected animal with a long memory, but we have differences. the differences are, as i've said before, that you perceive regulation as harmful. my analogy is, if you take the referee off the football field i guarantee the split ends are going to leave early and try to get the advantage and the little

guys on the field are going to get trampled on by the big guys because there's no referee to say, time out, you broke the rules. this bill is about putting the referee back on the field and saying, obey the rules, do not trample on the little people, don't take risks that you will expect them to pay for. more than half, mr. speaker, more than half of today's families have been affected. there is no way to overstate what happened to them and there's no mistaking the cause of the crisis, the wall street culture of reckless gambling and a culture of regulatory neglect that the last administration wants to return -- perpetuated and some want to return to. i simply think that would be a mistake. i talk to people in new jersey, they don't like what's

happened, they don't it to happen again and this is an effort to make sure that's the case. never again. never again should wall street greed bring such suffering to our country, and never again should washington stand by as that greed manifest itself as irresponsible risk taking a few share of the profits but main street bears the brunt of wall street's bets. now, let me say that i voted for that bill. i was wrong. the gramm bill. we didn't need to regulate derivatives. by the way, there were a number of democrats, leaders who said that as well. and mr. greenspan said it as well. he admitted he made a mistake and he was distressed by that mistake. now, we can't erase that crisis. but we can work to rebuild what we lost as democrats have done every time we've been

supporting job creation, to the recovery act, for cash for clunkers, for tax relief for small businesses. frankly been instructed by the minority party and the other body who have made a high stakes political bet on recovery's failure. that would be a shame. we can also, just as any responsible family would, ensure ourselves against a repeat crisis and protect america's jobs from another devastating collapse. the wall street reform and consumer protection act, which mr. frank and mr. dodd have led to this point, means an end to the irresponsible practices of the big banks. and i want to say the community banks, which i think mr. royce referred to, he's absolutely right. they were not the problem. none of our community banks. they could frankly care if people paid them back. they were careful people to whom theyygave loans could pay

them back. it was those that securitized them that put them in these big fancy documents that didn't care if they could pay them back because for the most part they made money on the transaction. not on the long-term responsibility of the debtor. i'm happy that among our financial institutions there are responsible actors who appreciate effective oversight and understand that it stimulates investment, enterprise, entrepreneurship and job creation. why? because people can trust the system, because they know the referees on the field are watching and they know the game can be honest. no one can create an economy without risk nor should it, but this bill will bring accountability on wall street and washington, protect and empower consumers, prevent future meltdowns and not bail out wall street excess. i want to say to my friend that mentioned we bailed out wall

street. how quickly you forget that it was president bush and secretary paulson and ben bernanke, appointed by chair of the federal reserve, that asked for that bill and that your leadership, for the most part, supported and urged its adoption. so with all due respect, it was president bush's administration that asked for that bailout, not democrats. what democrats did when they said there was a crisis acted in a bipartisan way to respond to that crisis. very frankly, i think we precluded a depression. americans have an obligation of responsible borrowing. but financial companies also have a responsibility to make loans fair and transparent. by creating a consumer federal protection bureau we can ensure that both sides live up to that bargain. the consumer financial protection bureau will strengthen and modernize the

oversight of wall street by putting the functions of seven different agencies in one accountable place. it seems to me that that would appeal to people who want not so many proliferation of various agencies crossing one another. in addition, corporations like a.i.g. and lehman brothers, will no longer be able to do the kind of gambles that risk our entire economy and indeed the world. institutions that placed the biggest economic bets will be required to keep capital on hand to meet their obligations should those bills fail and not expect the taxpayers to do that. this bill also reduces the conflicts of interest that allow credit rating agencies to wrongfully declare such institutions in good health long after they were dangerously overloaded. of course, the regulators weren't watching. there was a philosophy, of course, that regulation got in the way. and it prudently regulates the inherently dangerous derivatives that warren

buffett, and i call, weapons of financial mass destruction for the ability to bring down entire economies when bets go bad. should a major firm still find itself on the verge of collapse, this bill insulates the rest of the economy and keeps taxpayers off the hook, off the hook for any future bailouts. mr. speaker, tremendous amount of irresponsibility in washington and on wall street went into the crisis from which we are still struggling to recover. that crisis, of course, started in december, 2007. actually, it started long before that, as i said, in the late 1990's. middle-class family -- families who worked hard paid the price. but there is a consequence even worse -- a failure to learn. we know what greed and neglect can do. no one can plead ignorance. let's show, mr. speaker, ladies and gentlemen of this house, that we learned something from the crisis.

let's keep it were happening again. -- let's keep it from happening again. let me tell you what i hear from my constituents. they want us to stop it from happening again. they're angry about it. i'm angry about it. i'm sure that, ladies and gentlemen on both sides of the aisle, are angry about it. this is an opportunity to ensure to the extent we possibly can that this tragedy to so many millions of families does not happen again. i yield back. i yield to my friend. >> would the gentleman agree to this statement, though, that neither i nor i think anyone on our side of the aisle take the view that we want no regulation, that we are proposing no reform, that actually we have presented a

proposal for reform that we indeed need reform, differing in approach, an approach, we believe, would end the perpetual bailout? mr. garrett: do you think that we have a different perspective? mr. hoyer: will the gentleman yield? mr. garrett: yes. mr. hoyer: i do believe we come from a different place and i do believe that it's accurate to say that all of the republican presidents who have served during the time that i have served have advanced the proposition that regulation at the federal level was overburdensome and that it ought to be reduced. certainly we ought to reduce regulation that is nearly effective and is instrusive to the -- intrusive to the growth of this economy. mr. frank: will the gentleman yield? mr. hoyer: i will in just a second. but with respect to that, i think what we saw during the last decade was an excessive

commitment, as mr. greenspan pointed out, to the proposition , as mr. royce stated, just get out of the way, they will discipline themselves. frankly, the split end that leaves two seconds early because the referee is out on the field is not a bad person. he's trying to get an advantage. that's the difference, i think, between our perspectives. i understand that difference of perspective so i agree with you that we do have a difference of perspective. i believe this strikes the right balance, and i yield to the gentleman. mr. frank: i say to the gentleman from new jersey, i only judge what i see. when the house voted on this bill last december, the minority had certain amendments made in order under the rule. in the end they had the motion to recommit over which they had complete editorial control. the motion to recommit on this version of this bill that passed the house last december from the minority said no regulation, no reform of

regulation. it has one provision. it said kill everything in the bill. it didn't say do it differently. it didn't amend it. it didn't change it. it said do not change anything. do not reform anything except end tarp. which thanks to the senate, we are now doing in this bill. i can only judge what i see. when the gentleman says that, when the minority had a chance to offer their own version of this they offered a version that said no reform, no change, no new regulation, leave the status quo. mr. hoyer: reclaiming my time -- and i will -- i will now leave the stage after a little more than my minute. i will say to my friend that the chairman's answer i think reflects my view of our different perspectives. and i will now yield back the balance of my time. the speaker pro tempore: the gentleman from alabama. mr. bachus: thank you, mr. speaker.

at this time i yield five minutes to the gentleman from texas, mr. hensarling, the ranking member of the financial institutions subcommittee. the speaker pro tempore: the gentleman is recognized. mr. hensarling: i thank the gentleman for yielding. mr. speaker, the cause of our financial crisis is really federal policy, that strong arm that facilitated financial institutions to lend money to people to buy homes who couldn't afford to keep them. and people who decided to buy more home than they can afford and now expect their neighbors who didn't to bail them out. mr. speaker, it's not a matter of deregulation. it was a matter of dumb regulation and there was no dumber regulation than that which created the government-sponsored he want prizes and gave them an affordable housing mission and

ended up buying the lion's share of troubled mortgages or ensuring -- insuring the troubled mortgages in the system. again, it wasn't deregulation, it was dumb regulation, and all this bill before us does is perpetuate the same dumb regulation that got us into this financial pickle in the first place. the bill before us doesn't go to the root cause. it leaves the government-sponsored enterprises, which represent among other things the mother of all taxpayer bailouts, $147 billion and counting, $1 trillion of taxpayer money, is left in place. an amendment the republicans offered to reform the government-sponsored enterprises, those are somehow out of order. amendments that would put them in budget. no, they are somehow out of order. an amendment, there is one

little study in it. one study dedicated to the government-sponsored end prices, an amendment that would have ensured the -- enterprises, an amendment that would have ensured to figure out how to make the taxpayer whole, the democrats voted that down. they are even scared of a study that would try to make the taxpayer whole. instead, what does this bill do, mr. speaker? it creates a permanent bailout authority. there is only one reason to have a bailout authority and that's for bailouts. if you want more taxpayer -funded bailouts, this is the bill for you. to paraphrase from a line from the old kevin costner movie "field of dreams," if you build it they will come. the federal government can purchase the assets of failing firms. the federal government can guarantee the obligations of failing firms. the federal government can take a security interest in the

assets of failing firms. this is a bailout authority. the big will get bigger, the small will get smaller, the taxpayer will get poorer. now, i know our friends on the other side of the aisle continue to say, well, the taxpayers' not going to have to pay anything. well, the congressional budget office, headed by a democrat, they seem to differ. i have a copy of their analysis of the bill dated june 28, quote, c.b.o. estimates that enacting the legislation would increase direct spending by $26.9 billion, most of that amount would result from provisions that would establish a program for resolving certain financial firms that are insolvent or in danger of becoming insolvent. now, they're notorious for low balling these estimates but even they say -- even they say that ultimately taxpayers will be called upon for this bailout authority. mr. speaker, the best way to end taxpayer bailouts of failing firms is to end

taxpayer bailouts of failing firms. and that's really the choice presented before us. bankruptcy versus bailouts for failed wall street firms. the democrats obviously choose bailouts. think about it, mr. speaker, this is a job killer, pure and simple, a job killer. it creates a new federal institution to ban and ration consumer credit. the chamber of commerce representing main street, not wall street, estimates this will increase consumer interest 1.6% and fewer than 4.6% jobs will be created. community bankers in my district , if i have no compliance cost and the federal government is going to limit the kind of customized credits i can offer, we will had lose jobs in anderson county, texas. i hear from constituents, small businessmen, i own a small business, i'm a distributor for

a promotional product that comes from suppliers all over the country. without easy, reliable access to that credit, i'm out of business. mr. speaker, again, this is a job killer. i haven't even talked about the huge new expansion of government within this bill. the speaker pro tempore: the gentleman's time has expired. mr. hensarling: this should be defeated. i yield back. the speaker pro tempore: the gentleman from massachusetts. mr. frank: i yield one minute to the speaker of the house. the speaker pro tempore: the gentlelady is recognized. pell pell thank you very much, mr. speaker. i thank -- nancy pelosi thank you very much mr. speaker are, mr. speaker -- the speaker: thank you very much, mr. speaker. as i listen to the debate here, i can't help but remember, and i have a vivid memory of it, a couple of years ago, almost two years ago, september 18, a thursday afternoon, we were gathered in our office and had just seen a week and a half

proceeding, a week and a half to two weeks preceding that day, some unusual events that related to lehman brothers, merrill lynch and then a.i.g. and the said bailout of a.i.g. i called the secretary of the treasury and said, we're meeting here in my office and wondered if we could be helpful in any way in terms of public policy because what we seemed to see coming out from the executive branch is chaos, different responses to different challenges that were not adding up to us, could you, mr. secretary, come to the congress tomorrow and give us a report on what is happening? the secretary said, and i said, could you be here at 9:00 tomorrow morning to tell us what is happening to the markets?

secretary said, secretary paulson said, madam speaker, tomorrow morning will be too late. tomorrow morning will be too late. why, mr. secretary, have you not notified congress? why have you not called us sooner? why would it take a call from me to ask you to report to us, to tell us that tomorrow morning will be too late? without going into his response, which i'm happy to do, but in the interest of time i won't now, i then call the secretary, i mean the chairman of the fed, chairman bernanke, and asked him to join the secretary of the treasury at my office later that day. the meeting turns into a meeting that was half in senate, democrats and republicans, gathered together to hear from

the secretary of the treasury the condition of the markets. the secretary who had told us that we couldn't even wait until the next morning described a very, very grim situation. the chairman of the fed who is an expert on the great depression told us that the situation was so grim that if we did not act immediately there would be no economy by monday. this is thursday night. there would be no economy by monday. how could it be? we, the greatest country in the world, with the strongest economy, and that we needed to act immediately. the response from the bush administration was a bailout of the banks. and a 24-hour, 48-hour period

they produced a bill, $700 billion that they asked the congress to pass to bail out the banks. it was necessary to do. because of the recklessness of the bush administration's economic policy, because of the lack of supervision, discipline and regulation, the recklessness on wall street had taken us to the brink of a financial crisis of such magnitude that the chairman said there wouldn't be an economy by monday. took us into deep recession where 8 1/2 million jobs were lost, the people lost their jobs , therefore in many cases their health insurance, they lost their pensions, they lost their savings, they had to live off

savings and lost their investments for their children's education. because of recklessness on wall street, joblessness was rampant on main street. one of the reasons was there was no credit, it's interesting to hear my colleagues talk about the importance of credit to main street, but not one of them voted for the credit, the small business credit bill that passed in this congress about a week ago. but in any event, joblessness, lack of credit, suppressing the entrepreneurial spirit of the united states of america, because there were some, not all, but some on wall street who decided it was ok to privatize the game as long as they were making money and nationalize the risk, send the bill to the taxpayer.

that's why we are here today, to make sure that never happens again, to say to them that the party is not over, and it's interesting to note that in that message not one republican participated when this bill came to the floor originally. and that was the end of last year. years of allowing wall street to do anything it wanted -- beyond lassy fair, to be overleveraged, no transparency, no accountability, produce the most severe financial crisis and economic downturn since the great depression and the american people paid the price. again, eight million jobs, nearly $17 trillion in net worth disappeared, a record number of foreclosures ravaged our

communities and, again, credit disappeared from small business, small businesses. this also had a tremendous impact on construction in our country because of the lack of loans. today i rise with the clear message that the party is over, no longer again will recklessness on wall street cause joblessness on main street. no longer will the risky behavior of the few threaten the financial stability of our families, our businesses and our economy as a whole. the wall street reform and consumer protection act has been appropriately named for chairman dodd and chairman frank and i thank them for their leadership. bringing this legislation before the congress and doing so and bringing this legislation before the congress, chairman frank and chairman dodd are making history .

for decades to come their names will be identified with the stark reforms to protect the economy of our country and the financial and economic security of the american people. i also want to acknowledge chairman collin peterson who carefully negotiated some of the most contention provisions of this legislation, working with chairwoman lincoln on the senate side. all of the democratic conferees, i thank you for your commitment, for making the strongest bill possible and for always putting america's consumers first. today we will follow the lead of those on the committee and act in historic legislation to bring transparency to our financial markets, lowering the leverage that got us into this trouble in the first place, brings tough oversight to wall street and brings consumer protections to main street and to the american

people. by voting yes, we will pass the toughest set of wall street reforms in generations. this comprehensive and far-reaching legislation injects transparency and accountability as it lowers leverage into the financial system run amok under the republican's -- republicans' reckless economic policies. this legislation makes commonsense reforms that end the era of taxpayer bailouts and too bill to face d financial firms -- too big to fail d financial firms. it establishes a new independent agent solely dedicated to protecting americans from anticonsumer abuse. the bill closes the door on predatory lending and regulates payday lenders, it includes provisions to allow us to conduct oversight over the fed, establishes tough rules for risky financial practices,

enhances oversight for credit rating agencies and reins in egregious c.e.o. bonuses by giving shareholders a say on executive pay. it sheds light on the darkest corners of the derivatives market and is fully paid for and how is it paid for? by shutting down the bush era bailout fund known as the tarp and useing the savings for financial -- using the savings for financial reform. each member of this body faces a choice, we've had these choices before, democrats wanted to rein in health insurance companies, the republicans said no. democrats want to rein in big oil, the republicans said no, democrats want to rein in the recklessness of some on wall street, the republicans are saying no. each member of this body will have a choice, we can place our bet on the side of those on wall

street who have gambled with our savings and lost, or we can stand with main street and the middle class. will we preserve a status quo and if this bill were to fail we would be preserving a status quo that has left our economy in a wretched state? or will we guarantee the american people strong reforms and effective vigilance to prevent another financial crisis? how can we possibly resist the change that must happen? how can we forget that the chairman of the fed said if we do not act we will not have an economy by monday? four days from when we were having the conversation. how can we let the status quo that created that condition to continue?

i urge my colleagues to choose on the side of main street, i urge you to build a future of stability and security for america's families, consumers and small businesses. i urge you to vote aye on the dodd-frank wall street reform and consumer protection act. thank you, mr. speaker. the speaker pro tempore: the gentleman from alabama. mr. bachus: mr. speaker, at this time i have no other speakers and would like to reserve the balance of my time until the gentleman from massachusetts has no further speakers and is prepared to close. thank you, mr. chairman. i surrender -- yield myself such time as i may consume. the speaker pro tempore: the gentleman is -- the gentleman is recognized.

mr. bachus: mr. chairman, i hear two people that i know are leaders of the majority and they each, mr. hoyer and ms. pelosi, and i know they appear to be sincere when they say that never again will the american people be asked to bail out those on wall street who made reckless deals. no longer will the taxpayer be put on the hook. but there's an inconvenient truth here for my democratic friends and that's the clear wording of the bill. i mean, i think the elementary that before we pass legislation that we read it. and i would not repeat this

except my colleagues in the majority continue to say time after time after time that there's no bailout. and there is. there is an a.i.g.-style bailout. now, a.i.g. cannot be saved under this legislation, in fact, we changed -- changed that and we both insisted in a bipartisan way that a.i.g.'s of today will not survive and they will not survive under this bill. a.i.g., under this bill in a bipartisan way, we agreed, they fail. we say we put the a.i.g.'s in bankruptcy and they're resolved that way my democratic colleagues say that a.i.g. will be put -- or an a.i.g.-like failing company will be put in an fdic supervised resolution authority. mr. frank is correct when he says, wait a minute. wait a minute this only occurs

when these firms are being placed in liquidation. they have to -- they're being liquidated. well, now, i agree with him. now, now, is there no bailout of anyone on wall street? well, of course there is. there's a very expensive bailout. the dodd-frank bill promotes in section 204-d 1,-6. go write this down and go and read it. it says the fdic can lend to a failing firm, two, purchase the asset offings a failing firm, three, guarantee the obligations of a failing firm, four, take a security interest in the assets of a failing firm, five, and/or sell the assets the fdic has acquired from a failing firm. why would you lend a failing firm money sni keep asking that.

and the second thing is, where is the bailout fund in this bill? there is no bailout fund in this bill. there's $19 billion that's assessed toward community banks, fdic assessments that are raised about $9 billion. and there's the tarp program that's ended three months sooner than it should be, we're told somehow that because we're not going to start any new programs in that three months, somehow, hocus pocus, saves us about $10 billion and it is hocus pocus because you cannot spend the money on the new programs in this bill and then turn around and suddenly pull out of the hat the same money and give it back to the taxpayer. it doesn't happen. now, also, speaker pelosi may forget that the -- one of the first signs of trouble was not

in september of 2008, but it was in july of 2008 when we suddenly realized fannie and freddie were insolvent and many of our banks, almost all of our banks, had major positions in their shares. why did they have major positions in their shares of fannie and freddie? because the government said if you invest in that, we'll give you a special rating. we'll count it the same as treasuries. and it disappeared overnight. that was in july, not in september. banks took a hit on that. and democrats said at that time, and the bush administration, and the bush administration, we've got -- and secretary paulson, we've got to give $400 billion to fannie and freddie because in 1999, under the clinton administration, you said let's loan to people with poor credit, loan to people without much of a down payment and republicans and democrats both rush to use this into a source

of cheap money and it failed. and republicans said, and still say, and say as this bill is on the floor, wait a minute. you're going to reform these companies before you pour taxpayer dollars in them. and every republican in the house voted no, we will not give them taxpayer money until they're reformed and there's a plan to liquidate them. the chairman says we need to liquidate them. what about fannie and freddie? why aren't we liquidating them? and we're not. the biggest bailout we've had is of fannie and freddie who did we bail out? did we bail out the banks that had shares? no we bailed out the chinese bondholders and sec are retear paulsen said, the chinese may not lend us money. we'll sure need the chinese to lend us money if this bill passes because there's a derivatives section in here,

now, we have a letter that mr. peterson -- chairman peterson produced that says, this doesn't affect end users, but it's a letter. the truth is, we were in conference last week when we fought this out. and we voted for an exemption for end users and the democrats voted against one. and we've been told in the past 48 hours, 72 hours, by groups reich the international swap and derivatives association that this bill will cost businesses $1 trillion. $1 trillion. and that's capital and requirements to raise cash and it doesn't matter whether they trade in derivatives or someone does it for them, someone has to post that capital and that goes through and is an expense for that commercial company. if you take $1 trillion out of the economy suddenly, sure, you are going to have a crisis like this bill anticipates.

and this bill says, if there's such a crisis, that -- chairman frank keeps saying a receiver is appointed, a receiver is appointed. that's right. and that receiver after 30 days is authorized to borrow 90% of the fair value of the failing companies. chairman frank that is $8.5 trillion. that money is not in this bill. there's not even $10 billion in this bill for this type of resolution. you have to go to the banks or you have to go to the financial companies. are you going to get it after the fact? if they're failing, uh howe are they going to pay it i want to close with a positive and a way that the 320 members of this house who took a stand can take a stand in just a few minutes. collin peterson, chairman peterson, said there's no

requirements that end users post margins. and we all agree that if they had to, it would be $1 trillion out of these companies and $1 trillion, according to joe biden, will produce 700,000 to 1347b9 million jobs and will %- produce as many as 200,000 jobs a month. so that's the hit to this economy if this does a i ply to end users ystem of we have a motion to recommit. first it says there's an exemption on end users. now, you have said that there is one, thuff letter from chairman dodd and blanch lincoln saying there is one. that's half of it. you'd vote for that because you're saying it's in there. secondly, there's the federal audit. and we need, the taxpayers and voters are demanding, and mr. hoyer, transparency at the fed. they're spending trillions of dollars, committing trillions

of dollars let's have this audit of the fed. the speaker pro tempore: the gentleman from massachusetts. mr. frank: i yield myself as much time as i may consume. the speaker pro tempore: the gentleman has 7 3/4 minutes. mr. frank: mr. speaker, to begin, i want to address the members who are concerned that the interchange amendments will unduly affect smaller financial institutions. the interchange amendment wasn't part of the bill here. it was put in by a heavy vote in the senate and the conference process means a compromise there is in that amendment, as senator durbin put it in, an exemption for any fee set big the federal reserve for small institutions. they, then, feared they would be discriminated against so we amended the amendment. with the participation of the senate, obviously. and there were three provisions that protect smaller institutions, community banks, and credit unions.

there's an anti-discrimination provision that says merchants and retailers cannot refuse to accept a debit card on the basis of who issued it, and the federal reserve, the instructions of the federal reserve include making that anti-discrimination work. we can guarantee people we will do it. as the amendment passed the senate, it said the small institutions were exempt but they might have suffered discrimination. they are protected in this bill. that's why the small businesses in illinois have endorsed this bill. i want to talk briefly about what's happened with the tarp. we had the last two republican speakers, one hailed the c.b.o. is an unassailable authority, then the other speaker said it's hocus pocus. it is apparently unassailable hocus pocus, which i don't want to get into at this time. there's two parts of tarp. the bill does say repayments go

to debt relief. there have been substantial repayments from the banks, those go to debt relief and aren't affected by the amendment. what the amendment says is there's still tens of billions of dollars of tarp money that could be committed and the amendment we adopted in conference says, no more. they cannot do that. that's where the savings comes system of the savings comes from not allowing additional tarp spending. you know about the republicans with regard to cutting off tarp, they were for it before they were against it. they used to be against it. i prefer what we had in our provision, to assess the goldman sachs, j.p. morgan chase, mr. paulsen's hedge fund, that's the way we wanted to do it, we couldn't get it through republicans in the senate. first republicans in the senate said don't do it, other republicans then say why did you do it? i'll make a pledge right now, the economy i chair will bring out a bill that has an

assessment on the financial institutions above $50 billion so members who miss it will get a chance to show us they care. we'll bring it there and have that come forward. i don't want to talk a little bit about subprime lending and the partial history we get. the fact is, the republican party controlled the house and the senate from 1995 through 2006. during that period they showed remarkable restraint. as eager as they were to destroy subprime lending, as passionate as they were to reform fannie mae and freddie mac they didn't do it. that's a degree of abstinence unparalleled in political history. they were in charge. whose fault was it? it was my fault. as people said before, people have accused me of being the secret manipulator of tom delay. if that were the case, you wouldn't have cut taxes for

rich people, wouldn't have gone to war in iraq and if he was listening to me, he wouldn't have gone on the dance show. i don't take responsibility for mr. delay. the gentleman from california said he tried in 2005. he had an amendment to the bill of mr. oxley. mr. oxley, the republican chairman of the committee, brought up bill. if no democrat had voted either in committee or on the floor of the house on that bill, it would have worked exact -- it would have looked exactly as it looked. it was a majority of republicans. the gentleman from california, mr. royce, wasn't able to persuade a third of his fellow republicans to vote with him. i'm sorry he wasn't able to do better. i'm not an expert in how to get republicans to vote with him. i can't offer him any help. maybe he can find somebody to teach him how to get better votes among republicans. by the way, i did in 2003 say i didn't see a problem with fannie mae and freddie mac.

in 2004, president bush said to fannie mae and freddie mac, i order you, he had the power and used it, he used it to order them to increase subprime lending purchases. he wasn't alone in that. june 22 article of "the wall street journal" quotes a member to have congress in 2005 in a hearing saying work the advent of subprime lending countless families have now had their first opportunity to buy a home or perhaps be given a second chance. fail once, get it again. the american dream should never be limited to the well off or those consumers fortunate enough to have access to prime rate loans. that's the gentleman from texas, mr. hensarling. mr. bush -- president bush wasn't alone in that. then in 2007, the democrat tax power and we passed a bill for the first time in this house to regulate fannie mae and fred tee p.a.c. secretary paulsen said it didn't go as far as he'd like but it was a good bill. fannie mae and freddie mac were

put into conservatorship. they were the first major institutions to be reformed. we also in this house passed a bill to control subprime lending. the gentleman from alabama had been the chairman of the subcommittee with jurisdiction over subprime lending in those republican years and never produced a bill. he said it was our fault because he wrote a letter, myself, mr. miller of north carolina and we didn't tell him we'd vote for im. i wish i could have it back. i wish i knew i was secretely in charge of the republican agenda. i wish i knew they wouldn't do anything unless i said they could but nobody told me. where were they when i needed thome to be more powerful. the republicans never checked with me as to what they were supposed to do. it's 2007, we did pass such a bill to restrict subprime lending and the wall street journal attacked us. they said it was a sarbanes-oxley for housing.

sarbanes-oxley is about as nasty as you can get for "the wall street journal" and here's what they said about subprime lending in 2007. maybe that's what george bush expanded subprime lending. the "wall street journal" said in 2007, complaining about our will, for all the demonizing about 80% of even subprime loans are being paid on time and another 10% only 30 days behind. most new homeowners are low income families who would otherwise not have qualified for a mortgage. in the name of consumer protection, mr. frank's legislation will ensure that far fewer of these will be issued in the future. unfortunately a couple of years too late. we would limit them. i always wanted to do affordable rental housing which that administration opposed. this bill has the biggest package of increased consume brother texts in the history of america and it doesn't ban products or ration products, it says there has to be fair

dealing this bill says if a fiduciary responsibility of people selling products to individual investors for the first time, gives the s.e.c. the power to do it. reforms -- this bill reforms the system, i hope it is enacte >> palin don to pass deep financial regulations built in 1837-192 vote. it moves on to the senate that is scheduled to vote in mid july. if the senate passes it, as usual, we will have live coverage of the senate to debate on our companion network, c-span 2. >> for a snapshot of washington and a 111 congress, the c-span congressional directory, a reference guide to every member of the house and senate, supreme court justices and state governors.

order online. >> next, the financial crisis inquiry commission questions a aig executive about the role derivatives played in the 2008 financial collapse. congressional budget office director reports on the long- term outlook of the federal budget. and part of today's confirmation hearing for supreme court nominee elena kagan. >> c-span is now available in over 100 million homes, bringing you washington your way, a public service created by america's cable companies. >> the financial crisis inquiry commission is looking into the causes of the 2008 financial collapse. they had a hearing on a roll that derivatives play. this part of the hearing included testimony from the former head of aig's financial products division. this is just under three hours.

>> i want to start with some questions, first of all, on the management of derivatives by the organization. this is really about both the derivatives business as well as risk management in the company. i want to start with the perspective that things did not go well. earlier today, one of our witnesses indicated that his view that i think is shared by many is the story of aig's management was one of irresponsibility will matched only by a lack of accountability. i want to talk about the risk management. on december 5 of 2007, there was an investor conference. at that time, you said that the risks that aig took in the housing sector was supported by sound analysis and risk management structure that allows aig to put our capital to work in an efficient manner. you said that aig had a centralized risk-management function of overseeing the

market of each of our businesses as well as the parent company. during that same investor call, you said that aig fp had due diligence and it was a very selective process with rigorous models and assumptions. i want to ask you a number of questions about risk management. and i want to enter into the record a number of documents, one called risk-management. there were a number that we received and reviewed from aig and from price waterhouse coopers. in 2005, the amount of derivatives triples to about $54 billion. mr. sullivan, you told our staff that you did not know in 2005 that the decision was made and that you had tripled your exposure to credit derivative swaps asset backed securities.

>> i was focused on resolving the issues that were facing the corporation and that time. i won't repeat those for the record. my first knowledge of the cds portfolio was sometime during 2007. >> you had a book of $78 billion of exposure by 2007 and did not become aware until then? >> i was receiving regular reports on his business, but also from mr. lewis on aig's business in its totality including the swap portfolio. to the best of my knowledge, i

never recognized that portfolio, and there were no issues raised that would have given me cause for concern. >> in the management report sent up to the parent company, with the information have been there that the exposure had gone from $17 billion of the way up to $78 billion? that would have been in the management report floating up, correct? >> yes, sir. >> secondly, these representatives of the multi sector cdo's. they were almost overwhelmingly residential back and very substantially some prime. in a survey we did of some of the ceos -- cdo's were backed by rmbs residential mortgages. you indicated you decided to

stop writing on some prime instruments in january of 06, for example, you backed an instrument where it was 93% subprimal. -- subprime. my question is, you said you did a thorough due diligence. were you aware of the quality of the mortgages were you do direct analysis, or you confident that you had a full understanding of the nature of what you were backing? i'm sorry. i went fast. 93% sometime, 7% home-equity loans. >> the numbers you're referencing, i don't know specifically. i am happy to look at them again and go through them with you.

to enter your question more directly, we never diluted our underwriting standards at any point in time. we had rigorous standards, standards set by the aig credit risk management that we employed in underwriting these transactions. it is important to recognize, i think, that we did take the difficult decision to exit the business in 2005. the other thing that i think substantiates our underwriting criteria in these transactions is that many of these that we did it now reside in a special purpose vehicle the government set up after the bailout of aig. to date, that vehicle is performing. i am sure the commission knows

the statistics, the government lent the vehicle $11 billion and we have paid back $8 billion. as far as what i can see from where i sit when i looked at the portfolio residing there, i don't think any of the transactions have pierced the attachment level that we had set in our underwriting standards. >> on that point, while the real economic loss today might be relatively small, the projections by be upwards of 25% or 50%. is that not accurate? >> what i look to is the performance. and to see if anything has been pierced. we have gone through one of the worst financial crisis ises in

anybody's life time. as we country's financial crisis, the only thing i can do is look at the existing portfolio and say that it is performing through this crisis. and it is meeting the standards that we set. i think it is withstanding the test of time in these incredibly difficult circumstances. >> let me move on because it brings me to the next issue, which is, here is something that i want to query mr. sullivan about. the contracts that were written with party is like a goldman provided for collateral calls if there were declines in market value. i will stipulate at the beginning, you were aware of this, others were aware of this. my understanding is that there

would be collateral calls of their economic losses, if they are downgrade -- and thirdly, it declines in market values affected securities. i will talk to you at length about how this happened, particularly with respect to goldman in a few minutes. here is a major commitment by your company. you are backing, ultimately, $78 billion of protection. and what was imparted to us in our interviews is that you said, to the best of your knowledge, you were not aware of these mark to market terms until the summer of 2007, which makes sense because you weren't aware of the contracts until 2007. your cfo said that he was not aware that the contracts required posting the fair value decline. he first became aware in the third quarter of 2007.

you're the chief risk officer, and you told our staff that you didn't know about this until goldman made the first margin call on july 27, 07. when asked if the provisions caused consternation within the company, he said, i would say that is an understatement. the financial-services cfo will be here tomorrow. he did not know. the chief credit officer said that he didn't know. how can i come to be, mr. sullivan and mr. lewis they have $78 billion of contracts, and you do not know that the contracts have a provision in them or you're going to have the post of billions of dollars at market values declined if that happened. how does that happen? particularly in the context of compensation, how does that happen? how would you now characterize

that? >> the only way i can respond is by giving you the facts. the fact is, i only became aware of the cds portfolio in 2007. i did not receive reports -- i did received reports recognizing that no new business had been written since the end of 2005. >> that is not true. the book was $54 billion, there are deals in the pipeline, and we have a log. there were deals made. the decision was made, but the full wind down did happen immediately. he had $24 billion of exposure, and hedged. >> understanding is that there was a meeting of the mines, both my colleagues have articulated between the rm and aig fp.

as i said, the first time i became aware of the portfolio and collateral, the best of my recollection, it was 2007. >> that is stunning. mr. lewis, you're the chief risk officer, anything you want to add to this? >> the risk issues that were the focus of the attention at aig were around the actual credit risks and the underlying portfolios. the rigorous work that we did together was to determine what the likelihood was a of suffering credit losses defaults and losses in the underlying mortgages. the liquidity aspects -- it didn't focus on a stint that we now know we should have. these instruments, up until the

time of the crisis, had traded in very narrow bands, highly liquid, aaa securities. until the crisis occurred, when they traded off quickly and there was no market. >> were you aware that there was a liquidity provision? >> not until the day i testified. >> let me ask one more question and i want to turn and asked a little bit about how this market worked, the over-the-counter market. i will talk about the relationship with goldman. let me ask one more question of the two of you. the decision is made to stop writing protection on some prime backed ceos. -- cdo's. another division of your company, aig investments that invests on behalf of the entrances series -- and subsidiaries are making the change the policy for investors at the very time that one unit

is saying let's pull back. aig investments starts to load in and invest it -- a substantial amount of money, about $49.5 billion, 65% of your security lending portfolio backed by some prime mortgages by the end of 2007. at the end of the day, you did hedge your credit default swap portfolio. he dramatically increased your securities lending portfolio, and you lose about $40 billion on these credit default swaps. $55 billion on the securities lending portfolio. how does this happen? how do you of your exposure in one part of the company. price waterhouse cooper said

that this was a risk management failure. you told our staff that you did not think it was. your recognizing the risk, but you're upping your bets in another. how does that happen? >> the circumstances at the time were discussed at a concern that we had about the overheating of the market and the relaxation of lending standards, it was discussed throughout the corporation with financial products and the investment department. the investment department is also responsible, obviously, for investing the cash in the corporation to receive and burned a profit. there is a trade-off between risk and return, which our investment and -- professionals are responsible for. we're obviously concerned about the down sides.

what occurred, and i think he referred to the investment guidelines established an overall limit, not a directive or an appetite. the limit was determined and it was a quid pro quo, if you will. we agreed to up the limit, the compromise that we reached was that their investments would only be in the highest grade securities. there were no cdo's in that structure. >> he did it decline exposure in one area and up to it in another. i just want to make the point -- do you disagree with with price waterhouse coopers? >> with what occurred, there was a dialogue between the credit offices and the staff. the decision was made to make those investments in high grade

securities. >> i guess the answer is that you still don't believe it was a failure. in the time i have, i have been fascinated by this over-the- counter derivatives market and how it works, particularly the fact that it wasn't traded on exchanges, and clearly, i want to get a bead on precipitating factors in the crisis. the heart of the questions i'm going ask, was really the diminishing quality of some prime lending which you dispute? was that the rapid decline in market values? or were there dominos pushed year along the way? it is no secret that goldman sacks was a very significant counterparty of years. they had about $78 billion of exposure. about $21 billion of exposure. i will enter an item into the

record, a chronology of all the capital calls that goldman may. the amount of collateral you posted. the amount of credit protection that they bought on your company as well as a lot of the correspondence back and forth. when you look at that record, some things are clear. goldman was first in the door demanding collateral. they were the most aggressive in terms of timing and amount. for example, by the end of the year, of all the counterparties, you posted 89% of posted collateral for them. by june 30, they were 27% of the overall book, 48% of the collateral calls made were by then. they were way ahead of everyone else in terms of the amount of the were asking for, and they were much more aggressive in marketing these securities down. and so, i look at this and try to figure out what happened.

are they just reflecting what the market happened, what was happening in the market? is it like one of those discovery channel episodes where the chief that is chasing down the week member of the herd? is it the first domino that begins pushing market values down? in our interview with you, you said you thought something was up with goldman because there first collateral kollek comes on july 27, 2007, the revised it quickly downward from $1.8 billion to $1.2 billion. they settled, even though they reserved the right to dispute for $450 million. he said that mr. sherwood had told you that goldman did not cover themselves in glory during this time. he said that the markets starting to come our way, you took from our interview as an implicit admission of goldman's

initial collateral calls were too low. you noted that goldman was short on this the prime market, and you wondered whether goldman was pushing or driving the market. the record here, i want to ask you, how you perceive what happened here? how the heck do you set market prices during this time when gold in its own disclosures as it begins to continue to sell synthetic cdo's? they sold them all with your april of 2007. i want you to give me your perception of what was happening here. is that a lot? >> yes. as i go through this, if i miss anything that you're still interested in, just probie again. >> i may have to go the other members because of my time.

>> if we take the time from july, the initial collateral calls that came to us, if we put ourselves back into that, it was a time where it was one of the first times of increased market disruption due to what was to become the financial crisis of 2008. goldman sachs made the call on us of $1.8 billion. we were surprised at the magnitude of the call. surprised at the lack of income mentality to the cold, right? it went from nothing to $1.80 billion. my job is not to trust goldman sacks members, but verify. we received the numbers, we went out and asked for pricing. on the same instruments or similar instruments.

we received wide variances from the goldman numbers. their numbers were always lower than the others. >> i should remarked that they are lower all the way through. >> yes, sir. by instruct my team to assert, basically, the contractual rights to review the marks and the calls that they are making along with others. as you pointed out, chairman, the call rapidly declined. it went from $1.8 billion at the end of july, $1.6 billion, it became very rapidly. it moved to $1.2 billion, and within another 10 days -- if my days are right, the very early part of august, the number was down to $600 million. this time in the market, not a lot is going on.

the market is beginning to seize up. my team was at a consistent and regular dialogue with the folks at goldman. as we went through this process, we did settle at $450 million mark. i called my department and i said, and understand what happened or here or you come in at 1.8 million -- at 1.8 and end at 450. source clear views of pricing. in a market of transactions that don't trade actively, even in the best of times. he said, look, i don't think we covered ourselves in this whole process. the reason for me calling him was to say, we need to meet again. we need to figure out an objective way of getting values here.

and how are we going to manage this going forward? and we meant to do that again in the sit down and iron that out in september. the early part of september. i think your question is, what was my perception of what was going on? my perception that the time and still balance that we were working in an opaque market. the cost of the market was difficult to find price discovery. even a firm like goldman sachs was having trouble getting price discovery. and where they raise their prices and lower the collateral cost. >> they kept at it for a number of months, they kept coming. >> i am segmenting. what happens in september, we need to try to figure out a way

in which we can use the contractual rights that we have in the contract. if we have a strong disagreement in our collateral calls and you don't agree with the counter ", you can ask for a dealer call and say, i don't like this. let's go to the market. let's get prices on these things and average as out. we will use those as the arbiter. we discussed that in september. the process went dormant for a while, but at the same time, in late to timber, the fed may have made it one of the initial rate cuts that added a relief rally to the market. this issue went on the back burner. it wasn't until, i think, the very end of october and beginning of november when i received another call from mr. sherwood, he explained to me

that they were looking at their months-and numbers, he wanted to give me a heads up, and they were going to make another call at and another significant amount. this time, their call was at $3 billion. i said, look, we have to look at these numbers because of what happened last time. at that point, the response was, we think the market is coming our way at this time. >> i am going to move on. we have entered into the record, this will chronology that i believe is the first time this has been done. it is a very interesting work -- look at how this market worked. i know we have a full panel tomorrow morning in the golden folks later today. if there is time, i like to follow up with additional questions. i want to move on to other members. with that, mr. vice chairman?

>> my understanding from staff is, first of all, i want to thank you for coming. we have to be able to at least understand the mindset and the activities at the time from many different sources to understand the way you look at the world at that time. it is always easy in hindsight, to talk about could have, what have, should have. we have to try to understand where you were at the time that it happened. you are looking at where your today in terms of value and you make those arguments. i used to hear an old story that was supposed to be funny about a guy that pulls up to a gas station in vermont and asked directions and he says, have you lived here all your life? the old guy says, not yet.

so, are you able to project risk ahead? i assume that would have been part of your fundamental business. the answer i thought i heard from you to the chairman pose a question, they have not fallen apart yet. the will leave you are going to make money on these? is there going to be aulos eventually? any project that out? >> nobody can see into the future. when i was responding to the chairman pose a question, it was that we employed -- one of the questions, i think, was a credit risk that caused a problem in this portfolio. i think the credit risk analysis that we did, and the underwriting standards and the

structural support our so far, standing the test of time. >> just like the fellow that said, not yet. so far. in terms of this assessment, in terms of risk, you mentioned in your testimony, something that others have repeated, and that is that those underlying structures were after all, aaa. do you ever look to it as part of your due diligence in terms of risk, how the rating companies were coming up with what were aaa ratings and what was aaa a few years ago? was there not the same standard, or did you take the aaa label

for what it was? i guess you are part of that question as well, mr. lewis. >> are you asking me? >> sure, go ahead. >> we did a fundamental analysis of the transactions. we reviewed the underlying portfolios and the underlying assets within the portfolios directly. we were not reliant on the rating agencies to tell us what was good or bad in these portfolios. >> you were observing the degradation of the types of collateral, in fact, no collateral that was occurring in the mortgage activities? >> the issue that you identify it about the underwriting standards slipping is exactly what made us come to the conclusion that we need to exit the subprimal underwriting in

the multi sector cdo business as we saw the beginnings of the potential of for them to not hit the targets they had set because of the issues you identified. >> and that was in 2005? >> the decision was made in december of 2005, and we ran through the portfolio. >> what other date check, mr. sullivan. you indicated that you got a margin call or the initial communication with goldman in july of 2007? >> yes, sir. >> you are not surprised because you knew there is a market call. you were surprised at the size? is that when you found out that there were margin calls? >> to the best of my recollection, it was some weeks or months later.

>> after he began the negotiations in terms of whether or not those were appropriate amount for the margin call, you weren't aware of that at the time it occurred? you found out about it weeks or months later? >> i think it was later on in the year. >> ok. i am trying to take this in. i appreciate your cooperation. i will admit, i have never been involved in an enormous, multinational operation in which there is not as much communication about what i would consider major problems in a significant sector of the business. i want to ask some questions. mr. sullivan, about how we got into this. if you weren't aware there were margin calls, i guess i should address it to mr. cassano.

you were in this business pretty fast and furious prior to your recognition that you had the gold you could not climb out of, in that sense. you stopped digging. was it motivation on the basis of a compensation structure that you were doing all of this in the volume you're doing it because it was a line of business that was going to make a lot of money? or that the people who were doing it were making a lot of money? they are not always the same thing. >> one way of looking at this is to say that we, early on, in 2005, we took the decision to run down our portfolio. >> i am more interested in 2002, 03, 04, when you were writing it out.

>> i think what you need to look at with in these transactions is the underwriting standards that we committed to do these transactions. i have heard this phrase that is a one time an event, but when you think about the protections that we built into the contracts through the subordination levels, after the structural supports, and through the very strict underwriting standards, this was extremely remote risk business. and it is not the credit risk here that eventually became the issue at hand. my point has been that the underwriting standards and the credit risk with in these transactions have, today, been supported and still perform. >> i guess i have asked the question, how much money did you

get from the federal government? >> for the credit defaults portfolio? the federal government paid $40 billion. one of the things i wonder about what i look at that, i have never understood why the $40 billion was accelerated to the counterparts. i am only looking at it from afar, but what i think about the contractual defenses in the contractual rights we had, it has caused me to scratch my head and ask, why wasn't that $40 billion accelerated to the counterparts? >> you were not in the room when that kind of decision was made. at were you? >> i had left the company some months earlier. >> is always someone else. this is one of the problems that

i have what i try to explain what occurred, maybe i need a little help. there are people out there that are no longer in their homes, after what they believe is really no fault of their own. but we could it take in terms of why did they go ahead and get money out of their homes in terms of diminishing their equity and all those other arguments. but what i have a hard time doing is explaining why some people in the business, their taxpayer dollars kept in business, even receiving as much as $1 million a month when some of the folks who lost their homes won't make that much in their lifetimes. they read a newspaper story that their tax dollars, going to aig , what does it stand for? >> american -- >> american. the tax payer dollars going to

aig windup in a bank in great britain, in a bank in germany, a couple of banks in germany, banks in france. banks in scotland. banks in canada. how do i explain to them, based upon what happens to them, that what occurred between new and the federal government was something that should have been done, and needed to be done, and that, in fact, was the right thing to do in terms of resolving this issue. is there anything you can give me that i can tell them? >> what i would say, is that aig was under tremendous liquidity pressure at that point in time, and the taxpayer came into the federal reserve bank of new

york and assisted aig. the board made the determination to accept that assistance and move on. at that point in time, however, the markets were still in decline and there were further liquidity needs being put upon aig. at that time, the federal reserve bank took over negotiations and determined -- if they had discussions with my counterparts that we were not a party to that. a decision was made that the best way to a rest to the for the requirements of liquidity would be to set up the structure. for that structure, credit defaults swaps were extinguished and cancelled. the decision was made that the cash collateral would be part of the consideration given to the counterparties as well as the

sale of their cdo's through the ml3 structure. >> what concerns me even more is even today, did you see the article in the "new york times?" >> yes, sir. >> the timing may not be exactly right, but the move on part was an agreement reached with the federal government in terms of the condition of aid that there would not be certain activities pursued by aig either of a legal or other nature toward goldman sachs, i think this story said. or either of you aware of that prior to the story in the new york times?

>> i did not read the article, and i left the company months earlier, so i can't respond to your question. >> apparently there is an arrangement in which they would not pursue legal -- mr. lewis, everyone else -- your the only one left. >> our department would have been irresponsible for those negotiations. i was not a party to it. >> i guess i would ask your opinion. can you give me your opinion? you read the story. how is someone supposed to take that information about that kind of a deal being arranged? had you take it? >> s.a., i was not involved or responsible for the legal negotiations of aig and certainly not for the federal reserve bank.

>> are you shocked or surprised that there would be a deal like that? would you have done it if you had been their position? i am looking for a personal response. >> without knowing the other circumstances, i would be surprised. >> you'd be surprised or that maybe the situation was so bad that they would agree to anything and that is what they agreed to? >> i am surprised, but i can take into consideration other aspects that i am not aware of. >> hopefully others can do a better job of unraveling this. i will hold my time. >> thank you very much, mr. chair. i would like to start out talking with mr. cassano. aig financial products was a large, over-the-counter derivatives dealer.

and partly because of the commodity futures modernization act, partly because of your location of many of your operations in london, you were not really effectively regulated or overseen by a u.s. regulator. the product in the markets we're dealing in were not really overseen by the u.s. regulators. aig's derivatives portfolio, i understand in 2007, it was $2.7 trillion. is that right? >> those numbers make sense to me, but i have not looked at them. >> you were a dealer of many kinds of derivatives, not just credit derivatives?

>> that is right. >> with respect to your portfolio as a whole, did you had any part of that portfolio? >> yes. >> which parts? >> we ran books, derivative portfolios and interest rates, equity derivatives, commodities, and in credit. and in all of those portfolios, which operated with risk mitigation, like i was talking about earlier, we ran -- nothing is 100% hedged. the books were generally considered fully hedged. >> let's look at your credit

derivatives portfolio. i think there was something like more than $560 billion in the amount of credits derivatives in your portfolio in 2007. were you actually hedging in the conventional sense? or you're relying on the level at which you were insuring? i want you to answer or whether you're hedging away your hedging your interest rates by taking offsetting positions. >> the best way to delineate this is that the super senior credit derivative book, globally, it is the book you are referencing, we were using its audit actuarial basis in order to secure that business. it is not hedged in the

conventional sense that you're talking about buying and selling interest rate risk. >> you're just relying on the stressor of the instrument and what you were assessing as the safety factor, the extremely low risk of default that you were assessing for that instrument. you are not otherwise hedging by going out and offsetting, you are not purchasing any credit default swaps to offset the ones you were selling, is that correct? >> yes. i have made this point before, but if there had been any realized losses, we can also see the other portfolios as they still exist, and as best as i can tell, there have been limited, and perhaps mr. lewis

knows this better than i do. there have been limited losses associated with the piercing of the attachment point where risk would come to aig. i think from what i saw, there is a realization of and when they unwound a portfolio that they had. >> in your assessment of the risk in the underlying of the super senior credit default swaps that you had been issuing, you were only looking at one kind of risk on those instruments, weren't you? the default risk on the underlying? >> yes. >> you are not looking at the

risk that aig would have to post collateral, for example? >> we manage to the liquidity risk during the process. the transactions that had the collateral calls associated with them more transactions in the united states that were the multi sector book. we knew, we had as collateral calls, provisions. we knew we had the resources to manage those collateral call provisions. through my tenure with the company, we adequately -- >> where were your liquidity provisions, where would they be held? >> we needed to be able to pledged collateral or give people collateral at that time. committee that did a continuous

review about liquidity needs in our potential liquidity needs. and if we needed to, we could liquidate assets that we had. we had approximately $50 billion in liquid securities. we could liquidate those securities and use those to pledge as collateral. as i understand it, again, your knowledge is probably more perfect than mine, there were strange, but there were no issues meeting the collateral calls all the way up to the september events when the capital markets had seized up completely. all for that time, the team was able to adequately meet the collateral calls through the liquidity provisions that we had. >> mr. lewis, as the chief risk

officer, were you aware of the collateral obligations of aig fp on these contracts? >> i only became aware of the collateral call provisions in this book, the book regarding residential mortgages, and the latter part of 2007. >> therefore, you had not made any kind of liquidity provisions up until that time for that obligation? >> the responsibility for liquidity risk-management did not -- it was not directly under my jurisdiction. however, i was generally aware of the liquidity risk management process that financial products

did undertake or a reviewed their contingent liquidity requirements, and the requirements presented by this book of business did not rise to a level of concern until the market rally crashed in the 2008 time period. >> you think there were adequate liquidity provisions even though aig and up losing $40 billion on that portfolio? >> clearly -- >> and needing a government bailout and commitment of $180 billion and more? >> clearly, as it turned out, we did not have adequate liquidity management processes that took into account such a severe stress to the market and the requirement for liquidity under

those stressful conditions. clearly, we did not. during that time, 2007 into 2008, i was asked to take on responsibility with the treasury of addressing liquidity risk management processes and framework and the corporation. until that time, clearly, as it turned out, we did not have adequate liquidity risk management, or we wouldn't have had sufficient liquidity to weather that storm. >> let me ask mr. cassano if he was aware of the practices of other large over-the-counter derivatives dealers with respect to their cds transactions. was it unusual to hedge credit

defaults swaps as an over-the- counter derivatives dealer? or other dealers actually hedging those risks? >> it is a broad category, cds. if we're talking about super senior cbs, it is my understanding that there were many dealers were many participants in the market who had the same types of positions that we did commissioner, if i could -- >> goldman sachs, in the transactions we have seen were you wrote credit default swaps for goldman, they were using you to hedge its own commitments to other customers with credit

default swaps. >> in that instance, that is possible. i don't know what goldman was doing. there are others that were treating the businesses the same way we do. the insurance companies were looking at it the same way. those are the ones that come to my mind right now. >> did you ever consider putting aside the metal reserves -- capital reserves so that -- in the way that they were required to do to back up your obligations on these contracts? >> we had reserves against our entire book. it was a program that we needed and had developed between us and the credit risk management and market risk management functions in which we set aside reserves

for the rest of this business. we had a pool of reserves. when i look at this business and i try to segment what happened and what went -- what caused the bail out, it does not appear to may to have been a credit risk issue. i think it was a liquidity issue, and it was a liquidity issue that was brought about by the season out of the capital markets. but also, added to that issue, there is a market disruption of and going on in terms of trying to find a fair value for these contracts. these are